Wednesday, September 19, 2018
In Buying Long Term Care Insurance, It Pays to Go for the Sweet Spot
“For aging baby boomers, planning for long-term-care costs becomes more pressing every day. But the insurance that helps cover those costs is surging in price, while the benefits are becoming skimpier,” Eleanor Laise comments in Kiplinger’s Retirement Report.
It’s true. According to the American Association for Long-Term Care Insurance, the overall cost of new long-term care coverage has been jumping roughly 9% a year.
At Rebecca W. Geyer & Associates, our attorneys have been paying attention to the reduced number of viable long-term care insurance choices being offered to our Indiana estate planning clients. For one thing, as Kiplinger mentions, benefits such as lifetime coverage and a 5% compound inflation benefit protection have either become unaffordable features or aren’t being offered by some insurers.
There are most definitely “sweet spots” for purchasing long-term care insurance, we concluded. Those “sweet spots” relate to wealth, health, and age:
Age related sweet spot:
Ideally, clients purchase long-term care insurance when they are in their 50s. Not only do premiums begin to rise quickly from there, but one-quarter of applicants age 60-69 are rejected, Laise points out.
Asset-related sweet spot:
Wealthy people (Kiplinger refers to those with financial assets of $2.5 million +) may decide to forgo insurance. If they end up not incurring long term care costs, their heirs will receive more; if they do need to pay for long-term care, they can afford to do so. People with limited assets and those who cannot reasonably sustain the premium costs over decades would be better off not buying expensive policies, perhaps choosing lower benefits or limited benefit period coverage.
Health-related sweet spot:
Insurers have been tightening their underwriting standards, Laise emphasizes, so buying while you’re in good health has become even more important. Some companies have added blood tests and scrutinize family history for heart disease and dementia.
At Geyer Law, there are two phenomena we’re paying attention to - permanent life insurance with a critical care rider and hybrid insurance. In next week’s blog post, we’ll discuss the plusses and minuses of each of these approaches to long-term care insurance. Stay tuned….
- by Rebecca W. Geyer